Six Smart Ways to Use Your Tax Return

Friday, March 21, 2014, 1:00 PM | Leave Comment

People view tax refunds as yearly bonus sent to them by the government. Instead of acting like the refund is a windfall, treat it the same as the money you receive in your paycheck. Instead of putting the money in your account and watching it dwindle, assess how you could use the money.

Six Smart Ways to Use Your Tax Return

Here are six ways to use your tax return.

  1. Save for Emergencies

    Not having a plan to handle emergencies may leave you in desperate financial circumstances. Consider using the refund to start an emergency fund. Save the money in an account that is easily accessible. Use the money to pay for unexpected expenses and limit the reliance on credit cards.

  2. Pay Off Credit Card Debt

    Accruing credit card debt is easy, but reducing the balance is often difficult for many people. Using your tax refund to reduce or pay off your credit card balances. Reducing card balances will improve your credit score and decrease the amount of money you pay in interest fees.

  3. Invest in a College Savings Account

    Use your refund to invest in yours or your child’s college savings account. You can have the money direct deposited into a 529 College Savings Plan. Depending on your state of residence, you may be able to get a tax break any contributions to a 529 account.

  4. Buy a Car

    Putting a down payment on the purchase or lease of a car is another option for your refund. Many people who are in the market for a new car use their refund to make this purchase happen. Car dealerships offer financing deals during the month of April. These deals allow you to enjoy added savings that will reduce your car payments.

  5. Invest in Your Business

    If you were considering starting up your own business but lack funding, your tax refund can be a source of start up money. Use the money to purchase supplies and other business expenses. Make sure to use the money wisely. Develop a strategy for the money to ensure that you use it in a productive manner.

  6. Refinance Your Home

    Now is a good time to take advantage of low mortgage rates. Refinancing your home can saving you thousands of dollars on your mortgage. While refinancing itself does not cost anything, there are closing costs and other fees associated with refinancing.

Many people plan what they want to do with their refunds the minute their taxes are filed. However, what many people do not consider putting the money to good use. These six ideas will help you put your money to better use.

Information credit to Diamond Honda of Glendale, Honda in Pasadena.

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